If the Marginal Propensity to consume (MPC) is .9, what would be the change in GDP from an investment expenditure increase of $500 be?
1 Answer
Nov 2, 2015
Change in GDP
Explanation:
#DeltaY=DeltaI xx k#
Where
#DeltaY# is Change in GDP
#DeltaI# is Change in Investment
#k# is multiplier
#k=1/(1-MPC)=1/(1-0.9)=1/0.1=10#
#DeltaI=$500#
#DeltaY=$500 xx 10=$5000#
Change in GDP
